For investors in China’s “Big Tech” players, Xiaomi Corp (SGX: HXXD) might not be one of the first names that comes to mind. Xiaomi began life as recently as 2010 with a fairly simple ambition: to build high‑quality smartphones at affordable prices.

In its early years, the company was often described as “China’s Apple with Android pricing”, a saying that captured both its design sensibility and relentless focus on value for money. Yet more than a decade on, that label doesn’t truly represent what Xiaomi has managed to build itself into.

Today, Xiaomi is no longer just a smartphone manufacturer but it has evolved into a broad consumer technology conglomerate spanning phones, wearables, home appliances, lifestyle products, internet services, and now electric vehicles (EVs).

The company’s growth story is no longer about selling one more handset into an already crowded market, but about expanding an ecosystem that increasingly touches multiple aspects of daily life. Xiaomi went public in Hong Kong in the middle of 2018, raising around US$4.7 billion in the process. 

While Xiaomi’s market capitalisation remains relatively small (at US$119 billion), when compared to China’s tech heavyweights such as Tencent and Alibaba, it still operates in similarly large addressable markets. 

That gap creates both opportunity and risk for investors. Here’s how investors can think about Xiaomi stock in terms of its business and the broader China tech growth story.

Founder and CEO Lei Jun has often described Xiaomi as a company built for the long term, even when that meant sacrificing near‑term profitability. Early on, Xiaomi committed to a self‑imposed cap on hardware margins and focused on prioritising scale, user growth, and brand loyalty instead of quick profits. 

That strategy paid off as the company built a massive user base by selling competitively-priced smartphones online, minimising distribution costs and relying heavily on fan communities and social media. As volumes grew, Xiaomi extended the model into adjacent categories, from smart TVs and air purifiers to rice cookers and robot vacuum cleaners.

What emerged was not a random assortment of products, but a loosely integrated ecosystem anchored by the smartphone. Each additional device increased user engagement and data insights, reinforcing Xiaomi’s position as a central hub in consumers’ digital lives. 

As of Q3 2025, Xiaomi’s ecosystem, known as Xiaomi AIoT that serves as a network of interconnected smart devices, now has 742 million monthly active users (MAUs) globally. It’s built a loyal following that’s plugged into all sorts of Xiaomi products. 

Despite its diversification, smartphones remain Xiaomi’s core revenue driver, making up just over 40% of its top line revenue in its latest reported quarter (Q3 2025). The company consistently ranks among the world’s top smartphone vendors by shipment volume, with particularly strong positions in China, India, Southeast Asia, and parts of Europe. 

The global smartphone market is mature, and growth is no longer explosive. Yet Xiaomi has shown an ability to defend and sometimes expand its share by carefully managing its product mix. While it built its reputation on budget and mid‑range devices, recent years have seen a push into higher‑end models under the Xiaomi and Redmi brands.

This shift matters for margins. Premium devices carry higher average selling prices and better gross margins, even if volumes are lower. As Xiaomi gradually moves users up the value chain, it creates a more resilient revenue base while still appealing to cost‑conscious consumers.

Xiaomi’s IoT and lifestyle products segment is often underestimated. Internet of Things (better known as IoT) refers to Xiaomi’s connected consumer devices that we see every day in Singapore, as well as across the world – so think items like its air purifier, kettles, air fryers, or home security cameras.

Its ubiquitous app – Mi Home – is what oversees this IoT ecosystem and the company has a mountain of data on consumer behaviour as it relates to these devices. Of course, on the surface, selling smart kettles or desk lamps might not sound like a high‑growth tech business but in practice, this segment has become one of Xiaomi’s most strategic assets.

The company operates a partner‑driven model, investing in and supporting a network of hardware startups that design products aligned with Xiaomi’s standards. Xiaomi provides branding, distribution, and ecosystem integration, while partners handle manufacturing and product development. This asset‑light approach allows Xiaomi to expand rapidly across categories without bearing the full capital burden.

This business unit made up around 25% of Xiaomi’s overall revenue as of its latest reported quarter (Q3 2025) and it’s one that continues to grow in the mid-single-digit percentage range on a year-on-year basis.

Over time, the breadth of this portfolio strengthens Xiaomi’s ecosystem. A household that uses Xiaomi phones, TVs, wearables, and appliances is more likely to stay within the brand. That loyalty creates optionality for future monetisation through software updates, subscriptions, and services. 

If smartphones and IoT devices are the foundation, internet services are where Xiaomi’s long‑term margin potential lies. This segment includes advertising, gaming, financial services, and other software‑based offerings layered on top of Xiaomi’s hardware user base.

Internet services typically deliver significantly higher gross margins than hardware. As Xiaomi’s installed base grows, incremental service revenue can scale with limited additional cost. This operating leverage is central to the investment thesis on why Xiaomi is a growth play.

As you can see from Xiaomi’s latest Q3 2025, its gross margin for Internet Services was 76.9%. That was way higher than the overall group’s 22.9% gross margin for the period and significantly higher than the 11.1% gross margin for its core Smartphones business.

Xiaomi’s Gross Margin Profile for Q3 2025

Source: Xiaomi Q3 2025 earnings presentation

While Internet Services currently represents a smaller share of total revenue (just over 8% for Q3 2025), it contributes disproportionately to profits. Over time, a higher mix of services revenue could meaningfully improve Xiaomi’s overall margin profile, bringing it closer to platform‑oriented peers rather than pure hardware manufacturers.

Xiaomi’s decision to enter the electric vehicle market initially raised eyebrows. EV manufacturing is capital‑intensive, competitive, and operationally complex. For a company best known for smartphones and gadgets, the move seemed ambitious, if not risky. 

Yet Xiaomi approached EVs with the same ecosystem mindset that defined its earlier expansions. The company positioned its vehicles not merely as modes of transport, but as smart devices on wheels, deeply integrated with its software and hardware ecosystem.

The launch of Xiaomi’s first EV models, including the SU7, in March 2024 surprised many observers. Its outstanding early reception highlighted strong design, competitive pricing, and a software experience that felt cohesive rather than experimental. 

External validation followed. Even Ford CEO Jim Farley publicly praised Xiaomi’s EV after driving one, calling it a “fantastic product” and one he “didn’t want to give up”. Such commentary from a global automotive veteran, and true car enthusiast, underscored that Xiaomi’s EV push was being taken seriously and wasn’t dismissed simply as a vanity project.

Despite the early success, EVs remain the riskiest part of Xiaomi’s story. The segment is unlikely to be profitable in the near term, and execution missteps could weigh on margins and cash flow. 

Indeed, it is ramping up spending on capital expenditures, particularly for its EV division, and this has been evident in capex spends in 2025, with a sizeable 87% increase year-on-year for the 9M2025 period to RMB 13 billion.

Xiaomi Capex Spend (RMB billions)

Source: Xiaomi Q3 2025 earnings presentation

Its software expertise, supply chain relationships, and brand recognition provide a starting point many EV startups lack. The question, though, is whether Xiaomi can scale production efficiently and integrate vehicles seamlessly into its ecosystem. If so, EVs could become a powerful long‑term growth driver rather than a drag but it’s still a very big “if” at this moment.

It’s certainly a risk, given the intense competition in the China EV space, but Xiaomi’s product offering – basically a “smartphone on wheels” – aims to connect the car more deeply with its emerging AIoT (Artificial Intelligence of Things) ecosystem that looks to bolt on AI to its existing IoT business. Of course, there’s no guarantee of success, especially with the ongoing “involution” in China (which is a term given to the cutthroat competition in certain sectors that leads to diminishing returns and compressed margins).

However, if Xiaomi can scale profitably in the EV space, and the inevitable consolidation in China’s EV sector takes place, then the company could be one of the big ones left standing alongside the likes of BYD.

As of early 2026, its wildly-successful SU7 contributed to Xiaomi taking a 4.5% share in China’s Battery Electric Vehicle (BEV) market. Indeed, the company’s EV division reported its first-ever quarterly operating profit in Q3 2025 – posting a RMB 700 million profit; a remarkable achievement given it had only launched an EV in 2024.

First ever quarterly operating profit for Xiaomi’s EV division

Source: Xiaomi Q3 2025 earnings presentation

So what about Xiaomi’s most recent results? Its Q3 2025 numbers highlighted both the progress it has made over the past year and the reasons why the market has remained cautious on the stock (it’s down around 20% over the past 12 months).

Xiaomi management has been vocal about focusing on upping its deliveries of EVs in 2026 and founder Lei Jun announced a new 2026 target of 550,000 units, which would be up 34% from 2025’s EV sales. Indeed, it’s not only in China that Xiaomi is targeting growth of its EV business – it has global ambitions.

Within that, Xiaomi may launch four more EV models in 2026 and also has plans to break into chip production. In a similar vein to device makers like Apple, Xiaomi wants to bring chip production inhouse to power its devices so it isn’t beholden to surging memory prices.

For the quarter, the group reported revenue of RMB 113.1 billion, representing year-on-year growth of just over 20%. This marked a clear acceleration from the sluggish conditions that weighed on consumer electronics for much of the prior year and reflected improving demand across smartphones, IoT devices, and internet services. That’s something to be cheered given the generally downbeat mood for consumers in China. 

Adjusted net profit rose sharply to RMB 11.3 billion, up more than 80% year-on-year, supported by a combination of operating leverage and improved product mix.

Margins were a notable bright spot with group gross margin expanding to 22.9%, a multi-year high. That was driven by firmer pricing discipline in smartphones and sustained strength in internet services, where gross margins remained well above 70%.

The smartphone segment itself showed signs of stabilisation rather than outright growth. Shipments were broadly flat on the year but average selling prices (ASPs) improved as Xiaomi continued to push further into the mid-range and premium tiers. This shift supported profitability but also highlighted the reality that volume growth remains constrained in a mature and saturated global handset market.

Elsewhere, the IoT and lifestyle products segment delivered steady, mid-single-digit growth, reinforcing Xiaomi’s position as a leading smart-home ecosystem player, though margins in this segment remain structurally lower than in internet services.

Electric vehicles added both momentum and complexity to the quarter. Revenue from the smart EV and new initiatives segment surged as deliveries of the SU7 ramped up, providing early validation of consumer demand. However, the business remained loss-making, reflecting significant upfront investment in manufacturing, R&D, and market entry.

Taken together, the Q3 2025 results point to a business that is executing operationally and improving profitability, but not yet delivering the kind of clean, broad-based growth that would decisively shift investor sentiment for the stock. This balance helps explain why Xiaomi’s share price recovery has lagged its earnings rebound.

One of the key concerns for the market has been surging memory prices (DRAM), and also a big reason why its shares have been trending down recently. The price increase is expected to negatively impact Xiaomi’s smartphone business given it’s a key input into its handsets.

However, for investors who believe this pricing surge will eventually subside, this looks more likely to be a temporary headwind rather than a structural shift and if the company does manage to produce its own chips then this risk could be further mitigated.  

Xiaomi’s valuation stands out most clearly when viewed in the context of China’s broader technology landscape. On a trailing 12-month price-to-earnings (PE) ratio, it trades at around 22x, broadly in line with more established tech giants like Tencent and Alibaba.

Yet other, smaller “platform” companies trade quite a bit cheaper than Xiaomi. For example, Meituan is trading at 16x PE while Pinduoduo stock is going for as low as 10x PE.

A key factor on whether Xiaomi can meet loftier expectations is whether it will have continued reliance on hardware revenue. Hardware‑led businesses tend to command lower multiples due to thinner margins and greater sensitivity to pricing pressure.

Tencent and Alibaba, by contrast, derive a larger share of earnings from high‑margin platform activities such as gaming, advertising, and cloud services. Technically, they should be trading at a premium but they’re not. That tells you something about what investors are expecting from Xiaomi.

Execution risk will play a key role as it’s managing multiple strategic fronts at once: defending share in a mature smartphone market, scaling IoT and lifestyle products globally, growing higher‑margin internet services, and building an EV business from scratch. It’s a lot for any company, never mind a company that faces cutthroat competition in China.

All in, investors are paying neither an “expensive” nor “cheap” price for a business with greater uncertainty, but also with more room for transformation. Whether the business can live up to expectations (and even exceed them) will depend on execution rather than sentiment alone.

Xiaomi’s long‑term appeal lies in its balance of scale and ambition. With hundreds of millions of active users globally, incremental improvements in monetisation can have a meaningful impact on earnings. At the same time, the company’s relatively smaller market capitalisation means successful execution can drive outsized upside. 

However, risks should not be understated. Consumer tastes evolve quickly, and brand relevance cannot be taken for granted. Competition in smartphones remains intense, while the EV market is characterised by price competition, rapid innovation, and shifting regulatory standards. Any missteps in any of these areas could weigh on margins and investor confidence.

External factors add another layer of uncertainty. Regulatory developments, geopolitical tensions, and supply chain disruptions continue to shape the operating environment for China‑based companies with global reach. 

For investors, these risks are inseparable from Xiaomi’s growth story. The company offers exposure to a different kind of China tech narrative, one driven by ecosystems and hardware‑software integration rather than pure platforms. That distinction makes Xiaomi both harder to value and potentially more rewarding if its strategy plays out as intended.

Buying Xiaomi’s Hong Kong-listed shares directly can be a hassle for everyday investors in Singapore. You’d need access to the Hong Kong market and be prepared to purchase them in standard board lots of 200 shares — which works out to roughly HK$7,360, or around S$1,190 per lot at current prices. 

But thanks to SGX’s Singapore Depository Receipts (SDRs) for Hong Kong-listed stocks, that barrier to entry becomes much more manageable. For Xiaomi’s SDR — listed under the ticker HXXD — the underlying share ratio is 2:1, meaning every 2 SDRs represent 1 Xiaomi underlying share in Hong Kong.

And because the minimum lot size for SDRs in Singapore is just 100 units, you can get started with as little as S$300 (based on Xiaomi SDR’s latest price of $3), giving you exposure to Xiaomi without needing to invest a large lump sum upfront.

These SDRs give investors a beneficial interest in the actual Hong Kong-listed shares, which are held by a custodian on behalf of the SDR issuer, who in turn holds them for you, the investor. That means no foreign brokerage accounts, no additional FX spreads, and no worries about navigating the complexities of overseas markets.

Another practical advantage? Any dividends from companies are paid out in Singapore dollars. For investors who are used to dealing with foreign holdings, this simplifies things by eliminating currency conversion fees or cross-border tax questions on small amounts.

Finally, the SGX HK SDRs are fully fungible. That means you can convert your SDRs into the actual Hong Kong-listed Xiaomi shares at any time through your broker.

For Singapore-based investors looking to tap into a high-growth China story with a lot of potential, and that sits outside of the “Big Tech” giants, then Xiaomi SDRs make sense.

Tim has spent over 15 years in the finance industry with the likes of Schroders, The Motley Fool, and CGS International. 

He’s passionate about helping people take control of their finances by building wealth through long-term investing and thinking more coherently on all things "money".

Tim hopes to share the experience he’s garnered having worked in asset management, securities, and private wealth. He loves breaking down complex financial topics into content that’s easy to understand and, most importantly, engaging.

Give him a follow on Instagram at @timtalksmoneysg or subscribe to his free weekly newsletter at TimTalksMoney.com for more smart money and investing insights.

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